Navigant Research Blog

The smart thermostat space is filled with a range of big players, as depicted in the Navigant Research Leaderboard Report: Smart Thermostats. Alphabet backs the Nest Learning Thermostat, Honeywell offers the Lyric, and Amazon supports ecobee thermostats. Finally, another major technology provider is joining the game: Microsoft.

Microsoft’s Smart Thermostat

Microsoft recently revealed that it will be releasing a smart thermostat called GLAS in partnership with Johnson Controls. Much like the Nest Learning Thermostat, GLAS reportedly senses when a user is in the room. It also determines indoor and outdoor air quality and adjusts the temperature accordingly. Though the company has not unveiled details on the thermostat’s release date or pricing, what is clear is that the thermostat is built on Microsoft’s Windows 10 IoT Core, it will support Microsoft Azure cloud services, and perhaps most importantly, it will be embedded with Microsoft’s digital assistant, Cortana.

Digital assistants are increasingly making their way into smart home devices. Leading thermostat provider ecobee recently released the ecobee4 thermostat and a light switch embedded with Alexa. General Electric will release its Alexa-embedded Sol lamp in September. Apple offers another digital assistant, the Home app, that allows users to control HomeKit devices via Siri. Google’s Assistant can be used to control its Home Wi-Fi speaker, its Pixel smartphones, and even its Chromecast smart TV device. Voice recognition is quickly becoming a significant part of the smart home experience, as my colleague Neil Strother pointed out in another blog.

Digital Assistants Can Coordinate Energy Savings

While energy currently takes the back seat to other use cases like security, comfort, and convenience in the smart home, interfaces like voice activation can help consumers take more interest in controlling their connected energy devices. Consumers do not often think about their energy consumption, a fact made clear in a recent consumer survey. The survey indicates that in 2016, the average consumer of a regulated US utility spent about 8 minutes annually interacting with their utility through digital channels. However, energy devices have a convincing value proposition because they can help consumers save energy and money—it just takes more interaction with these devices to increase awareness around their benefits, which digital assistants can foster.

Nest has been on an upward trajectory since its launch in 2010, and the company now finds itself at an important juncture with the departure of co-founder and CEO Tony Fadell. It is worth noting how the company’s journey began not long ago when it effectively fueled the stagnant thermostat market with its introduction of the Nest Learning Thermostat. As my colleague Neil Strother puts it, “Before Nest came into being, the thermostat was a pretty basic household device, and Nest set a new standard.” The company became an even bigger player in the thermostat space when it was acquired by Google in 2014 for $3.2 billion, Google’s second largest investment behind its acquisition of Motorola for $12.5 billion in 2012. Simply put, Nest has excelled in the connected home space, becoming what many consider to be the top player and star of the market.

Despite years of success, in recent months Nest has been the subject of a myriad of media stories highlighting technology glitches, internal struggles, and lawsuits. In December 2015, the New York Times covered a software glitch that drained the Nest thermostat’s battery and deactivated the device for an unconfirmed number of users, though the company was able to fix the issue for 99.5% of affected customers. In January 2016, it was reported that the Nest was leaking ZIP codes over Wi-Fi, and while this is not the most sensitive information, it may give consumers reason to be concerned about the security of Internet-connected devices. In May 2016, Honeywell and Nest settled their long-standing patent dispute, which began in 2012 when Honeywell sued Nest Labs, stating the company’s thermostats infringed on seven of Honeywell’s patents related to thermostat technologies.

To top off this wave of negative media coverage is the news of Tony Fadell stepping down from his role as CEO. This decision follows months of reports about internal struggles at Nest with regards to Fadell’s management style, though the official reason given for his departure is simply that it’s time to move on. Alphabet, parent company of Google, reports that Fadell will become an advisor to Alphabet.

Although the current media climate and Fadell’s departure seems to cast a bleak shadow over Nest’s future, the reality is that smart thermostat technology is still evolving, and fast-growing companies in this space (such as Nest) experience bumps along the road. It is important to keep a patient perspective, and take negative coverage with a grain of salt, because despite Nest’s issues, it remains a major player and leader in the smart thermostat market, and is likely to remain so for the foreseeable future.

Environmentally conscious consumers have a new friend in Canadian thermostat and energy management solutions provider Energate and partner WattTime, which is piloting a new program in the Chicago area. Participants in the program receive one of Energate’s HōlHōm smart thermostats with a new Clean Power Mode feature, which prioritizes the use of clean energy sources over traditional fossil fuel resources. The technology works by identifying the availability of clean energy sources through public and private data sources and synchronizing the HVAC system’s air conditioning and heating cycles to correspond to this availability. It follows the common set-and-forget trend with smart thermostats, where the activation of Clean Power Mode will automatically prioritize clean energy resources without intervention by consumers. Energate also claims that this technology will never raise a consumer’s monthly energy bill or make them sacrifice comfort. The pilot program is funded by a $600,000 grant from The Great Lakes Protection Fund and is set to begin this month.

The underlying technology in these smart thermostats was developed by WattTime, a non-profit company built on research from the University of California Berkeley, Yale, and Carnegie Melon that provides environmental demand response software. WattTime’s research has been funded by companies such as Fast Forward, Great Lakes Protection Fund, Google.org, and the Berkeley Energy & Climate Institute. The goal of the company’s technology is to give consumers the choice of whether or not they want their energy use to support fossil fuel power plants or clean electricity. Though WattTime’s work with Energate is only in the pilot phase, the company hopes to implement the program on a larger scale and partner with utilities to offer incentives for using this technology.

Various Partnerships

While Energate only recently became partners with WattTime, the non-profit has already been working with other companies to deploy its technology. Building Clouds, a building energy management systems (BEMS) solutions provider, partnered with WattTime to deploy equipment on an existing HVAC unit on the University of California Berkeley campus that allows WattTime’s software to activate the HVAC system at times when clean energy is available. The company has also partnered with electric vehicle (EV) charging station provider eMotorWerks to launch a smart EV charging station called JuiceBox Green 40, which uses timing algorithms to identify which power plants will provide electricity for EV charging and shifts the time of charging to minimize carbon emissions. This allows consumers to minimize the pollution footprint of their EV at current reduction rates of up to 60%. As seen in the graphic below, these partnerships address buildings, homes, and EVs, each of which are not only heavy electricity users, but also significant contributors to carbon emissions.

WattTime Enabled

(Source: WattTime)

Though these are relatively small projects, they demonstrate a simple (and potentially scalable) way to integrate renewables further into the energy mix, supplement existing demand with renewables, and reduce carbon emissions. WattTime’s software can make renewables more reliable, an issue that has consistently presented major challenges to the mass adoption and investment in clean energies given their intermittent power generation. It can also help reduce the portion of renewables that go unused, as high electricity output from renewables does not always correspond to peak demand, which has driven the need for large and expensive energy storage projects to store excess energy for times when the sun is not shining and the wind is now blowing. Additionally, this technology represents a larger trend in the industry of organizations moving to more customer-centric business models and giving consumers more choice when it comes to their energy consumption.

American consumers are ready for the next wave of connected products—or the Internet of Things (IoT)—for their homes. Their awareness is growing about how these products can bring benefits to their lives, according to research sponsored by Alphabet subsidiary Nest Labs. While this is encouraging news for hardware vendors and utilities aiming to capture the energy management component, the road ahead has some bumps (more on that in a moment).

First, the results from the two Nest-sponsored studies provide a positive outlook: 81% of respondents either own or are interested in buying a connected home product in the next year. They see the major benefits as increased convenience (54%), increased security (44%), reduced energy bills (38%), and boosted home values (21%). Enthusiasm for these products is on the rise as well, with 38% of respondents more interested today than they were 6 months ago. Asked which brands come to mind in the connected or smart home space, the respondents ranked them in this order: Nest (21%), Apple (12%), and Samsung (8%).

Increasing Awareness

The growing awareness is being felt and fueled at the retail level and among broadband service providers as well. Connected home products are among the fastest growing categories in the retail environment, according to one Home Depot executive. Sears recently introduced the first of a growing assortment of smart home products to be marketed under its Kenmore, Craftsman, and DieHard brands; each of these five first products is Wi-Fi-enabled.

Likewise, a new partnership between Comcast and Earth Networks’ WeatherBug Home highlights the growth in smart home technology and an increasing focus on energy efficiency. “The smart home is quickly becoming a reality, and when it comes to energy efficiency, knowledge is power,” says Bob Marshall, CEO of Earth Networks. “We are excited to partner with Comcast to extend the benefits of our unique home energy insights to Xfinity Home customers and the utilities that provide their energy services.”

Addressing Glitches

But looking beyond the smart-IoT-home hype, there is some reality to consider. Samsung has had to contend with some glitches with its SmartThings technology for the home. Nest has also been called out for problems with its thermostat. Consumers have issues, too. The vast majority (82%) are concerned about keeping personal information secure online, and nearly half (43%) worry that new home technologies will quickly become outdated, according to Nest-sponsored research.

For utilities and other smart home market stakeholders targeting energy efficiency products, the overall upward trend is still encouraging. In my research, I’ve found the market for these products to be growing, and they will likely go mainstream in coming years. Nonetheless, shrewd players will develop a strategy for getting beyond those pesky speedbumps.